Canada’s competition watchdog found grocers had increased their profits by 50 per cent during a period when inflation rose to a 40-year high.

  • Canada's competition watchdog found grocers had increased their profits by 50 per cent during a period when inflation rose to a 40-year high.
  • “We need to curtail this. This is greed.” New Democratic Party Leader Jagmeet Singh said grocery stores should be subject to a windfall tax.

After the Competition Bureau found grocers had increased their profits by 50 per cent during a period when inflation rose to a 40-year high, New Democratic Party leader Jagmeet Singh called for a windfall tax on the grocery sector.

New Democratic Party leader Jagmeet Singh says the Competition Bureau’s finding that the big three supermarkets have significantly increased their profits should prompt the government to impose a windfall tax on the grocery sector.

“There’s now clear evidence that corporations have been using inflation as cover to make more profit. And that profit is driving up the cost of living,” he said.

“We need to curtail this. This is greed. And one of the ways is putting in place an excess profit tax.”

In a report released earlier this week, the Competition Bureau found that the country’s big three grocery chains — Loblaw, Empire (Sobeys) and Metro — had increased their profits by 50 per cent during a period when inflation rose to a 40-year high.

This finding should trigger a recommendation for a windfall tax made by the Parliamentary Committee on Agriculture and Agri-Food after months of hearings into grocery price inflation, Singh said.

The CEOs of the country’s big three chains testified in front of the committee, telling MPs they were not increasing their food prices more than necessary. But they declined to provide the detailed accounting to prove it, saying the numbers were confidential.

Instead, all three CEOs pledged to provide numbers breaking down profits in food and non-food items to the Competition Bureau. The Committee said if the bureau found that the supermarket chains are “generating excess profits on food items,” the government should consider introducing a windfall profits tax.

“To have the Competition Bureau confirm that, yes, these excess profits are absolutely contributing to the cost of living that people are experiencing confirms what we’ve been saying for a long time. And it’s a very credible, independent body,” Singh said.

Asked for comment, a spokesperson for Innovation Minister François-Philippe Champagne called the Competition Bureau’s analysis “a good first step.”

“We will take the time to review its recommendations and see how we can continue to make life more affordable for Canadians.”

Michelle Wasylyshen, spokesperson for the Retail Council of Canada, an industry group that represents supermarkets, disputed that a windfall tax was called for, pointing to the fact that the Competition Bureau did not find that grocery profits were “excessive.”

“Canadian grocers’ profits have always been modest and hence wouldn’t attract any sort of excess profits tax,” she wrote in an email.

Grocery prices remain a lightning rod for the debate around inflation and how it should be tackled. While Canada’s bout of multi-decade high inflation has subsided over the past few months, grocery prices continue to increase at a rapid rate.

The cost of groceries is now rising at 9 per cent year-over-year, almost triple the 3.4 per cent rate of general inflation. Grocery prices have shot up almost 20 per cent over the last two years, according to Statistics Canada.

While supply chain issues have certainly contributed to those price increases, soaring profits at the big three supermarket chains have pushed prices up further.

Earlier this week, the Competition Bureau released its market report on the grocery sector, concluding that a lack of competition has allowed the major supermarket chains to increase their profit margins.

Those margins – also known as markup – have increased by a “modest yet meaningful” amount, the Bureau found, helping inflate the profits of the big three supermarket chains.

The Bureau’s study mirrors the methodology and conclusions of a Star investigation last year, which found increased profit margins had cost Canadians an extra $1.4 billion on their grocery bills in a single year.

Because the three chains make more than $100 billion in sales, even tiny increases of less than a percentage point in profit margin work out to tens or hundreds of millions of dollars in extra profit.

The government enacted a windfall profits tax on banks and insurance companies fairly quickly after the pandemic lockdowns but has been holding off on doing the same for other industries that have dramatically increased their profits during the same period, said Katrina Miller, executive director of Canadians for Tax Fairness.

“The government now has all of the evidence it needs to move forward with a windfall profits tax in order to take some of that money back,” she said.

“It’s got the precedent of the tax that it put on banks and insurance companies. It’s got an all party committee recommending such a tax. And now it has a Competition Bureau report that provides the proof that these profit margins are increasing at a time when Canadians are paying more for their groceries.”

Marc Lee, a senior economist with the Canadian Centre for Policy Alternatives, said it is important to focus on profits as a driver of inflation to counter the narrative coming from the Bank of Canada that inflation is being caused by Canadians earning too much money.

“The food sector is a case in point. It’s not because Canadians have suddenly started eating more that’s causing these higher prices. We’ve seen that the grocers have padded a little bit at the supermarket till and that’s what’s showing up as increased profits,” he said.

A windfall tax would allow the government to recoup some of these excess profits and redistribute the money back to needy families.

“Government can’t necessarily control prices, but they can impose these taxes and flow that money back to households that are struggling so they can make ends meet at the end of the month,” Lee said.

In addition to confirming increased profit margins in the grocery sector, the Competition Bureau revealed that not all the supermarkets had cooperated during the study, despite pledging to do so before parliament.

“The level of co-operation varied significantly, and was not fulsome. In many instances, the Bureau was not able to obtain complete and precise financial data, despite its repeated requests,” it stated in its report.

The bureau said this lack of co-operation showed it needed increased powers to compel documents from companies.

Commissioner Matthew Boswell has publicly called for legislative changes to update competition law and empower the bureau to more effectively protect Canadian consumers.

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